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Mid-America Business Index Climbs at Year End

(KFOR NEWS  January 2, 2020)  The December Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Minnesota to Arkansas, moved above growth neutral.

December survey highlights:

  • The overall index moved above growth neutral for the second time in the past three months.
  • For 2019 in terms of overall economic growth, the states ranked from top to bottom: Arkansas, Nebraska, Kansas, South Dakota, Minnesota, Missouri, Iowa, North Dakota, and Oklahoma.
  • Seven of 10 supply managers expect finding and hiring qualified workers to be the greatest 2020 challenge for their firms.
  • On average, supply managers expect to receive a 2.5% wage increase in 2020
  • In terms of projected 2020 overall economic growth, the states ranked from top to bottom are: South Dakota, Nebraska, Arkansas, Kansas, Minnesota, Iowa, Missouri, North Dakota, and Oklahoma in ninth place.

Overall index: This is the second time in the last three months that the overall reading has climbed above growth neutral 50.0. The Business Conditions Index, which ranges between 0 and 100, rose to 50.6 from November’s 48.6.

“Surveys over the past several months indicate that the regional manufacturing economy is being negatively impacted by the trade war with China and the global economic slowdown.  This will be a drag on the overall Mid-America economy for the first half of 2020. However, I expect overall regional growth to remain soft but positive for the first half of the year,” said Ernie Goss, PhD, director of Creighton University’s Economic Forecasting Group and the Jack A. MacAllister Chair in Regional Economics in the Heider College of Business.

Employment:  The December employment index increased to 45.6 from November’s very weak 37.2. The availability of workers continues to constrain job growth in the region. In December, seven of 10 supply managers indicated that finding and hiring qualified workers was the greatest 2020 challenge for their firms.
One supply manager responded, “Biggest challenge to 2020 economic success: Everywhere in our organization is challenged to hire good, steady employees.”
The weakness in the region’s manufacturing and agriculture sector has spilled over into the broader regional economy. Over the past 12 months, the Mid-America region has added jobs at a 0.7% pace, or less than half the 1.5% rate of the U.S. economy.
As a result of the weak regional manufacturing regional economy, supply managers expect a low average 2.5% wage gains for 2020.

Wholesale Prices: The wholesale inflation gauge for the month indicated only modest and declining wholesale inflationary pressures with a wholesale price index of 57.6, down from 65.7 in November.  Last month, 43% of supply managers reported tariffs had increased the prices of supplies and inputs purchased by their firm. However, one supply manager said, “The increase in commodities purchased are the result of tariffs.”  “Tariffs have, to date, had only a modest impact on our wholesale inflation gauge,” said Goss.
Another supply manager said, “Open market trade benefits a wider range of consumers over isolating certain items through tariffs.”

Confidence: Looking ahead six months, economic optimism, as captured by the December Business Confidence Index, climbed to 57.6 from November’s 52.9.  “Potential January passage of the U.S. Canada, Mexico trade agreement (USMCA) and Phase I of the trade agreement with China boosted the regional business confidence index for the month,” said Goss.  As stated by one supply manager, “I am very happy to see US/China Phase 1 agreement to cancel tariffs for Dec.15, and cut the Sept. 1 tariffs in half.”

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